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Do You Need Separate 529 Plans for Each Child?

December 4, 2020
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Sootchy Team

Many people wonder if they should open a 529 plan for each child or if one 529 plan can have multiple beneficiaries. Learn more from our college savings experts.

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Funding even one child’s education is no mean feat; trying to put two or more kids through college can be a financial nightmare. In many cases, a traditional savings account won’t cut it because the returns are minimal, and the gains on most investment plans are taxed, limiting their value as college funds. One particular option that’s popular among parents is the 529 plan, which provides tax-advantaged returns on contributions and can help with college funds considerably, but are these accounts appropriate for parents with more than one child to provide for? And even if they are, should you open a 529 plan for each child? To find out the answers to these questions and others, keep reading as the 529 experts at Sootchy cover this topic in detail.

Can a 529 Plan Have More Than One Beneficiary?

Any parent or family member looking to help more than one child save for college must consider two specific points above all others: whether one 529 plan can have multiple beneficiaries and whether they can have more than one account. The first of these questions is a bit complicated, so we’ll start there.

For the purposes of paying most costs associated with higher education, such as tuition, fees, and room and board, 529 plans can have only a single beneficiary – the person on whose behalf the funds in the account are spent. Since this is the primary use of a 529 plan, it means that parents are often barred from having one account for several children, especially if more than one kid will be attending college at the same time. That said, it should be noted that an account owner can typically change the beneficiary on an account at any time, so if you open a 529 plan for one child and have funds left over after they graduate, that money could then be used for their sibling.

And when it comes to student loan payments, there’s even more flexibility for parents with several children. The rule governing the use of 529 plans for student debt is that each beneficiary can only put up to $10,000 toward loan payments from a 529 plan, which is a lifetime limit; however, the law also allows an equal amount to be used for each of that beneficiary’s siblings, so if you have one child with a 529 plan and another paying for loans, you can pay down student debt for both children from a single account.

Can You Have Multiple 529 Accounts?

If you want to open college funds for multiple children, the next question that must be asked is whether you can have two 529 accounts. In short, yes, you can absolutely have more than one 529 plan; in fact, your options are even more extensive than you probably realize.

Anyone looking to open a 529 plan for each child will be able to choose from among all the plans offered by the various states, not just those in the state where they live, and they can even open multiple 529 plans for a single child. This detail opens up a world of possibilities, but it can also leave parents overwhelmed by the sheer number of accounts available to them, making it difficult to sift through the options and pick those appropriate for their family. However, any state’s 529 accounts will differ from those of another, so by identifying the characteristics you want a plan to have in your plan, it’s possible to narrow the list and find one or two accounts that fit your family’s needs. The following are a few factors to consider when choosing a 529 plan:

• What kind of 529 plan is it? A prepaid tuition plan, college savings plan, or ABLE account?

• What kinds of returns can you expect on an investment in the 529 plan?

• What investment options are available through the plan?

• How much will you have to pay in fees for the 529 plan?

• Does the 529 plan cover a variety of education-related expenses, or only tuition?

• What state tax benefits does the plan offer? What is your state’s policy?

• In the event you want to switch accounts, what restrictions are there on rolling over funds?

• How easy will it be for family members to contribute to the 529 plan?

• What is the minimum contribution to start a plan?

Beyond these questions, there are a number of financial considerations particular to your circumstances that could guide a decision regarding 529 plans. For instance, some plans – namely prepaid tuition plans – require you to make regular contributions of a certain size. If you’re the type who is more successful at saving when the process is automated and obligated, then this type of plan may be right for you; if you prefer the flexibility to add what you want, when you want, then a college savings plan might be a better option.

Get Help Opening 529 Accounts for Each of Your Children from the Team at Sootchy

Whether you’re having trouble deciding on a 529 plan for your child or children or you know what plan you want and are ready to get started, the experts at Sootchy can guide you through the process quickly and easily. With the Sootchy smartphone app, adding funds to a 529 plan has never been simpler, both for parents and for family members who want to help provide a college education for your children. Learn more about how Sootchy can assist you in saving for your children’s future by visiting us online or downloading our app today.

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